KBRA is publishing issuer and senior unsecured debt ratings of BBB for Owl Rock Technology Income Corp. (“ORTIC”) or (“the company”). On September 13, 2022, these ratings were initially assigned on an unpublished basis. The rating Outlook is Stable.

Key Credit Considerations 

The ratings reflect the company’s ties to the sizeable $68.6 billion Blue Owl direct lending platform, the derived benefits from ORTIC’s SEC exemptive relief to co-invest with other funds managed by the advisor and its affiliates, and its diversified $2.0 billion investment portfolio with a focus on providing financing to technology focused upper middle market companies as of December 31, 2022. The company’s investments classified as traditional financing comprised 84.5% of the debt portfolio, while its investments classified as growth capital comprised 10.6% as of December 31, 2022. Investments classified as traditional financing had a weighted average EBITDA and enterprise value of $249 million and $5.7 billion, respectively. Investments classified as growth capital had a weighted average enterprise value and revenue of $15.0 billion and $2.2 billion, respectively as of December 31, 2022. First lien senior secured debt comprised 78% of total investments. The company’s top 3 industry concentrations were Systems Software (23.3%), Application Software (18.2%) and Health Care Technology (10.9%). The ratings also reflect the company’s appropriate gross leverage of 1.04x within ORTIC’s target range of 0.9x to 1.25x. Regulatory asset coverage was 195.9%, allowing for an adequate 30.6% asset coverage cushion which KBRA believes should help ORTIC absorb increased market volatility with higher interest rates and inflation in less favorable markets. The ratings also reflect the company’s solid management team, which has a long track record of working within the private debt markets with each member of the Investment Committee having an average of over 25 years of experience in the industry. Additionally, the company has a team of approximately 25+ tech-dedicated investment professionals and maintains an office in Menlo Park, CA to support origination and risk management. The company had no non-accruals as of December 31, 2022, partially due to the generally short period of operations, less than two years ago. The strengths are counterbalanced by the potential risk related to the company’s illiquid investments as a BDC, its unseasoned investment portfolio stemming from its recent operating commencement in 2022, fully secured funding profile as well as retained earnings constraints as a Regulated Investment Company (RIC). To further diversify its funding sources and increase financial flexibility, ORTIC plans to issue unsecured senior debt in the medium term. The company has $1.75 billion of committed debt facilities with approximately $22 million available.

As a continuously offered preferred BDC, the company does not seek a liquidity event. However, the company intends to tender up to 5% of its shares outstanding on a quarterly basis. As of February 1, 2023, the company raised total gross proceeds of approximately $1.1 billion. During the 3 months ended December 31, 2022, approximately $186 million was raised while only $22 million was tendered.

Owl Rock Technology Income Corporation is a private perpetual non-traded, externally managed, non-diversified closed-end management investment company that has elected to be treated as a Business Development Company (BDC) under the 1940 Act and to be treated as a RIC, which, among other things, must distribute to its shareholders at least 90% of the company’s investment company taxable income. The company was formed in June 2021 as a Maryland Corporation and commenced operations in May 2022. The company is managed by Owl Rock Technology Advisors II LLC an indirect subsidiary of Blue Owl Capital, Inc. (NYSE: OWL), which had approximately $138 billion of AUM as of December 31, 2022. The company’s investment strategy coincides with the strategies of Owl Rock Technology Finance Corp. (KBRA Issuer/ Senior Unsecured Debt ratings of BBB/ Stable Outlook), and Owl Rock Technology Finance Corp. II (KBRA Issuer/ Senior Unsecured Debt ratings of BBB/ Stable Outlook). Blue Owl’s technology lending products had approximately $16.0 billion of AUM as of December 31, 2022.

Rating Sensitivities 

In the near future, a rating upgrade is not expected. The Stable Outlook could be revised to Positive if ORTIC’s asset quality remains solid despite the company’s rapid growth and leverage metrics remain appropriate for the company’s risk profile. A rating downgrade and/or Outlook change to Negative could be considered if there is a significant downturn in the U.S. economy with negative impact on ORTIC’s earnings performance, asset quality, and leverage. A significant change in senior management and/or risk management policies could also lead to negative rating action.

The ratings are based on KBRA’s Finance Company Global Rating Methodology published on November 28, 2017 and KBRA’s ESG Global Rating Methodology published on June 16, 2021.

To access ratings and relevant documents, click here.

Disclosures 

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA 

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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